Red Cave Law Firm Consulting's Technology Blog Series (from CEO Jared D. Correia, Esq.)
4/6/2021: Tracking Shot: How Do You Manage Your Law Firm Expenses?
You know that to effectively manage your law firm finances that you need to create revenue projections, to establish goals for what you want to make. You also understand that in order to establish revenue projections in a coherent way, you have to establish a figure for your overhead, i.e. — the costs that go into running your law firm. Of course, you are acutely aware that your costs to operate equal business expenses, and that some of those business expenses, the larger ones (like malpractice insurance and your office rent) are easier to keep track of than others. But, what if you treat somebody to lunch? Or, you gas up a rental car?
Tracking business expenses admits of the same issue as tracking time spent on client matters: If you’re not diligent, you may miss out on some items, especially the smaller items. It’s also a good idea to contemporaneously track business expenses, just as you would contemporaneously track time on the client matters you’re working in; and, the reasoning is the same: it’s easier to capture the data right away, than to expect to build a faithful reconstruction after the fact.
Fortunately, there are a number of expense tracking apps that allow you to construct a contemporaneous record of your expense logs, right from your smartphone. Take a picture of a paper receipt, categorize it and get rid of the paper. In this way, expensing apps are a necessary, if often overlooked, component of the paperless law office.
Some options to consider are: Expensify, Wally and Marcus. And, that’s the short list. But, whatever option you use, start recording a higher percentage of your expenses (like all of them), and don’t miss out on a single deduction come tax time.